Goldman Sachs issued a report stating that Tencent (00700.HK) delivered robust third-quarter results, with revenue growing at its fastest pace in four years and adjusted operating profit showing steady growth. This reinforces the firm's positive view on the company due to its unique WeChat ecosystem and global gaming assets, which provide diverse monetization levers to help drive compounded earnings growth through macroeconomic cycles.
The firm continues to believe that Tencent is one of the best-positioned companies in China’s internet sector to benefit from the ongoing application of AI, with its two main revenue streams—gaming and marketing services—maintaining over 20% year-on-year growth for three consecutive quarters. The firm has raised its revenue forecasts for 2025 to 2027 by 0-1% to reflect the improved sustainability of growth in gaming, marketing services, and financial/enterprise services driven by the continued adoption of AI. It has also slightly adjusted its net profit forecasts for 2025 to 2027 by -1% to 0%, as strong revenue growth was partially offset by increased expenses related to AI-related computing power leasing, marketing costs for AI-native applications, and R&D expenditures for AI projects. The target price remains at HKD 770.
The firm has revised downward its projections for Tencent’s capital expenditures in 2025 and 2026 to RMB 80 billion and RMB 100 billion (from RMB 100 billion/RMB 117 billion), reflecting the company’s shift toward renting more computing power (increased OPEX, reduced CAPEX) amid restricted external chip supplies. Management stated that GPU capacity is sufficient to meet internal needs.
